Malta must find other ways to grow the economy in a future that “must rest on everything except construction”, Finance Minister Clyde Caruana has told Times of Malta.
This does not mean the country can or should do without construction, but developers have an interest to convince people that the success of the economy is hinging on it. This is simply not true, the minister said.
Caruana was reacting to last Sunday’s Times of Malta interview with mega-businessman and developers’ lobby boss Michael Stivala who argued for the need for more buildings and less bureaucracy.
Caruana said Stivala wrongly attributed economic prosperity to the growing construction industry and incorrectly argued that future economic growth depends on more construction.
“Of course he’s going to say that... he’s a developer,” Caruana said. “But it’s a short-sighted vision. We don’t need to sustain the current rate of construction to prosper, and we cannot afford it. We are already paying too high a price for it because we are small, and it has had an impact on our health and environment.”
Last week, Stivala told Times of Malta that the country needs more construction, foreign workers and tourists if it intends to sustain economic prosperity. If done sustainably, and government improves infrastructure and public transport, a population increase will not feel as suffocating as it does now, the construction mogul said.
Stivala said the government is raking in millions from development, enabling it to sustain free health and education and social measures.
But Caruana disagreed.
Last year the economy grew nominally by 13 per cent and most of it was not thanks to construction, but due to the financial, gaming and tourism sectors and other industries of the sort, the minister said. And Malta needs to expand more of those industries.
“We must change our economic model. And we have already done this before. During the British era, most of our economy depended on the British, but that didn’t prevent us from exploring new ways to prosper when we gained independence. And that’s what we should do again now.”
This was the Nationalist Party’s major cry during last year’s election campaign. The economy ballooned only because of unbridled construction and an influx of foreign workers, the PN had insisted, to the detriment of the people’s health and wellbeing. It had even promised to launch 10 new economic sectors if elected to government, including investment in artificial intelligence, e-sport and the metaverse.
But Caruana said the country would be better off expanding existing industries like the manufacturing sector. Renewable energy production is picking up rapidly in Europe, especially in the wake of the Ukraine war, and Malta could do well in that sector.
“And when I say manufacturing, don’t think of production lines of people sewing jeans. The industry has advanced greatly since then and today it employs the smartest engineers and scientists. Energy costs a lot of money, and yes, we could be generating high-quality jobs and growing the economy through a modernised manufacturing industry.”
Europe is currently facing a troubling shortage of electronic chips, for example, because most of them are not manufactured in European countries, he said. That is another area in which Malta could grow.
Stivala, a hotelier, also said Malta would probably be able to welcome more than five million tourists annually if it fixes its infrastructure and public transport. For this reason, he explained, more hotels can be built and would be filled.
Again, Caruana disagreed. The current number of hotels can already sleep enough people to cater for an increase in tourists, and Malta does not need to build more. Before taking over one of the country’s most delicate seats as finance minister, Caruana headed the national employment agency – Jobsplus – for a period during which Malta experienced a foreign worker influx. Many people have since blamed overpopulation on his policies.
The current number of hotels can already sleep enough people to cater for an increase in tourists, and Malta does not need to build more- Finance Minister Clyde Caruana
He did not deny his responsibility but said that was a time when the economy needed it. Now there needs to be a shift towards more capital intensive, rather than labour intensive, investment.
“We must distinguish between economic growth and economic development. We must now become more quality, and not quantity oriented.”